First Housing Corporation d/b/a Cathedral Manor

Department of Housing and Urban Development Finding No. 2024-001; Federal Assistance Listing Number 14.134, Mortgage Insurance - Rental Housing. Criteria According to 24 CFR 891.400(e), residual receipts reserve deposits should be made within 90 days of year end. Condition During the years ended July 31, 2019, 2020, 2021, 2022, 2023 and 2024, management did not make the required residual receipts reserve deposit in the amount of $81,489 that was required within 90 days of year ended July 31, 2018, as required by HUD. The residual receipts amount has not been deposited as of the date of this report. Cause Controls were not in place in 2019 to ensure that required residual receipts reserve deposits are made timely. Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement. Questioned Costs None Context The annual calculation was not prepared by the management agent, and accordingly, the required deposit was not made. The auditor notes that the deposit requirement was calculated with the inclusion of a subsidy receivable due from HUD that was not received until after the 90-day period. However, we also note that at the time the subsidy was received, the delinquent deposit should have been made and was not made. Identification as a Repeat Finding This finding is a repeat finding (see prior year finding number 2023-001). Recommendation Management should establish internal controls and procedures to ensure that required residual receipts reserve deposits are made timely. Auditor's Noncompliance Code: B - Failure to make required residual receipts deposits Finding Resolution Status: Unresolved Views of Responsible Officials - As of July 31, 2024, the amount due to the residual receipts has not been deposited, until the property is in a positive cash flow position, management is not able to commit to any type of repayment plan and management is looking for forgiveness on the amount.

Finding No. 2024-002; Federal Assistance Listing Number 14.134, Mortgage Insurance - Rental Housing. Criteria According to the HUD Handbook 4350.1, Appendix 2, the terms of the loan from the reserve for replacement required repayment from the proceeds of the Section 8 subsidy. Condition During the years ended July 31, 2019, 2020, 2021, 2022, 2023 and 2024, management did not fully repay the loan advanced from the reserve for replacements upon receipt of the Section 8 subsidy that was outstanding at July 31, 2018. The loan in the amount of $19,337 is deemed to be an unauthorized distribution. As of July 31, 2024, the amount due to the reserve for replacement has been partially repaid. The remaining amount due as of July 31, 2024 is $9,669. Cause Management did not maintain adequate controls in 2019 over the reserve for replacement requirements established with the loan advance to ensure the timely repayment of the loan upon receipt of the delayed Section 8 subsidy. Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement. Questioned Costs None Context HUD approved a loan from the reserve for replacement with the stipulation that the loan be repaid when the delinquent Section 8 subsidy was paid by HUD. Identification as a Repeat Finding This finding is a repeat finding (see prior year finding number 2023-002). Recommendation Management should establish internal controls and procedures to ensure that required payments are made timely. Auditor's Noncompliance Code: N - Reserve for replacements deposits Finding Resolution Status: In process Views of Responsible Officials - The updated loan agreement was signed on March 14, 2024 to repay the $9,669 balance of the loan borrowed to the Lender, with a payment of $100 each month until the loan is repaid in full.

Finding No. 2024-003; Federal Assistance Listing Number 14.195, Section 8 Housing Assistance Payments Program Criteria Tenant lease files are required to be maintained and tenant eligibility determined in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. Condition Compliance procedures were not followed regarding the timely use of Enterprise Income Verification (“EIV”) system during annual recertification or initial certification process. Cause Management's policies with respect to the determination of tenant eligibility and the maintenance of tenant lease files in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs were not consistently followed. Effect or Potential Effect The procedures for determining tenant eligibility and maintaining tenant lease files were not consistently applied in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. This could result in units being rented to ineligible tenants or errors in the rent subsidies paid by HUD. Questioned Costs None Context In connection with our lease files review we noted the following deficiencies: 2 out of 8 existing tenants tested, the Project completed Enterprise Income Verification ("EIV"), but it was not performed within 120 days prior to tenant's annual recertification, which constitutes noncompliance with HUD regulations regarding tenant eligibility and the maintenance of lease files. 1 out of 1 new tenant tested, the Project completed Enterprise Income Verification ("EIV"), but it was not performed within 90 days after the tenant's move-in date, which constitutes noncompliance with HUD regulations regarding tenant eligibility and the maintenance of lease files. Identification as a Repeat Finding This finding is a repeat finding (see prior year finding number 2023-003). Recommendation Management should monitor compliance with established procedures to ensure that tenant eligibility is correctly determined and that tenant lease files are properly maintained in accordance with the requirements of HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. Auditor Noncompliance Code R - Section 8 program administration Finding Resolution Status: In process Views of Responsible Officials-Management has implemented compliance monitoring measures that ensures every file is fully audited for signatures, dates and proper calculations. The compliance manager utilizes a monthly checklist which now includes confirming signatures and dates are present.

Department of Housing and Urban Development Finding No. 2023-001; Federal Assistance Listing Number 14.134, Mortgage Insurance - Rental Housing. Statement of Condition During the years ended July 31, 2019, 2020, 2021, 2022 and 2023, management did not make the required residual receipts reserve deposit in the amount of $81,489 that was required within 90 days of year ended July 31, 2018, as required by HUD. The residual receipts amount has not been deposited as of the date of this report. Criteria According to 24 CFR 891.400(e), residual receipts reserve deposits should be made within 90 days of year end. Questioned Costs None Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement. Context The annual calculation was not prepared by the management agent, and accordingly, the required deposit was not made. The auditor notes that the deposit requirement was calculated with the inclusion of a subsidy receivable due from HUD that was not received until after the 90-day period. However, we also note that at the time the subsidy was received, the delinquent deposit should have been made and was not made. Cause Controls were not in place in 2019 to ensure that required residual receipts reserve deposits are made timely. Identification as a Repeat Finding This finding is a repeat finding (see prior year finding number 2022-001). Recommendation Management should establish internal controls and procedures to ensure that required residual receipts reserve deposits are made timely. Reporting Views of Responsible Officials The amount due to the residual receipts has not been deposited. Until the property is in a positive cash flow position, management is not able to commit to any type of repayment plan and management is looking for forgiveness of the required deposit from HUD. Auditor's Noncompliance Code: B - Failure to make required residual receipts deposits Reporting Views of Responsible Officials The amount due to the residual receipts has not been deposited. Until the property is in a positive cash flow position, management is not able to commit to any type of repayment plan and management is looking for forgiveness of the required deposit from HUD.

Statement of Condition During the years ended July 31, 2019, 2020, 2021, 2022 and 2023, management did not repay the loan advanced from the reserve for replacements upon receipt of the Section 8 subsidy that was outstanding at July 31, 2018. The loan in the amount of $19,337 is deemed to be an unauthorized distribution at July 31, 2023. The amount due to the reserve for replacement has not been deposited as of the date of this report. Criteria According to the HUD Handbook 4350.1, Appendix 2, the terms of the loan from the reserve for replacement required repayment from the proceeds of the Section 8 subsidy. Questioned Costs None Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement. Context HUD approved a loan from the reserve for replacement with the stipulation that the loan be repaid when the delinquent Section 8 subsidy was paid by HUD. Cause Management did not maintain adequate controls in 2019 over the reserve for replacement requirements established with the loan advance to ensure the timely repayment of the loan upon receipt of the delayed Section 8 subsidy. Identification as a Repeat Finding This finding is a repeat finding (see prior year finding number 2022-002). Recommendation Management should establish internal controls and procedures to ensure that required payments are made timely. Auditor's Noncompliance Code: N - Reserve for replacements deposits Reporting Views of Responsible Officials A repayment plan has been put in place. Commencing in March 2024, four monthly installment payments will be made in the amount of $4,834 until the balance is paid in full.

Finding No. 2023-003; Federal Assistance Listing Number 14.195, Section 8 Housing Assistance Payments Program Statement of Condition In connection with our lease files review we noted the following deficiencies: 1 out of 1 move-outs tested did not have the inspection signed by the tenant or an employee at the property. 1 out of 1 move-outs tested did not have the inspection dated by an employee at the property. 1 out of 1 move-ins tested did not have the tenant’s Enterprise Income Verification (“EIV”) performed timely within the 90 days HUD requires. Criteria Tenant lease files are required to be maintained and tenant eligibility determined in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. Questioned Costs None Effect or Potential Effect The procedures for determining tenant security deposits and eligibility and maintaining tenant lease files were not consistently applied in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. This could result in units being rented to ineligible tenants or errors in the rent subsidies paid by HUD. Cause Management’s policies with respect to the determination of tenant security deposits and eligibility and the maintenance of tenant lease files in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs were not consistently followed. Identification as a Repeat Finding This finding is not a repeat finding. Recommendation Management should establish procedures and monitor compliance with those procedures to ensure that tenant security deposits are correctly recorded, tenant eligibility is correctly determined and that tenant lease files are properly maintained in accordance with the requirements of HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. Auditor Noncompliance Code R - Section 8 program administration Reporting Views of Responsible Officials Management has hired a new Compliance Manager and engaged a third party compliance monitoring company to review all files and EIV processes effective May 1, 2024.

Finding No. 2022-001; Federal Assistance Listing Number 14.157, Supportive Housing for the Elderly. Statement of Condition During the years ended July 31, 2019, 2020, 2021 and 2022, management did not make the required residual receipts reserve deposit in the amount of $81,489 within 90 days of year ended July 31, 2018, as required by HUD. The residual receipts amount has not been deposited as of the date of this report. Criteria Residual receipts reserve deposits should be made within 90 days of year end. Questioned Costs None Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement. Context Annual calculation was not prepared by the management agent, and accordingly, the required deposit was not made. The auditor notes that the deposit requirement was calculated with the inclusion of a subsidy receivable due from HUD that was not received until after the 90-day period; however, we also note that at the point in time when the subsidy was received the delinquent deposit should have been made and was not made. Cause Controls were not in place in 2019 to ensure that required residual receipts reserve deposits are made timely. Recommendation Management should establish internal controls and procedures to ensure that required residual receipts reserve deposits are made timely. Auditor's Noncompliance Code: B - Failure to make required residual receipts deposits Reporting Views of Responsible Officials The property did not generate any positive operating cash in the 2021-2022 fiscal year and was not able to make the installment payments to the residual receipts. Additionally, there was a substantial increase in property operating expenses. Management is looking for forgiveness of the residual receipts deposit.

Finding No. 2022-002; Federal Assistance Listing Number 14.157, Supportive Housing for the Elderly. Statement of Condition During the years ended July 31, 2019, 2020, 2021 and 2022, management did not repay the loan advanced from the reserve for replacements upon receipt of the Section 8 subsidy that was outstanding at July 31, 2018. The loan in the amount of $19,337 is deemed to be an unauthorized distribution at July 31, 2022. The amount due to the reserve for replacement has not been deposited as of the date of this report. Criteria The terms of the loan from the reserve for replacement required repayment from the proceeds of the Section 8 subsidy. Questioned Costs None Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement. Context HUD approved a loan from the reserve for replacement with the stipulation that the loan is repaid when the delinquent Section 8 subsidy was paid by HUD. Cause Management did not maintain adequate controls in 2019 over the reserve for replacement requirements established with the loan advance to ensure the timely repayment of the loan upon receipt of the delayed Section 8 subsidy. Recommendation Management should establish internal controls and procedures to ensure that required payments are made timely. Auditor's Noncompliance Code: N - Reserve for replacements deposits Reporting Views of Responsible Officials During the 2021-2022 fiscal year, there was no operating surplus cash for the property to be able to make any repayments to the reserve. Additionally, there was a substantial increase in property operating expenses. Management will not be able to repay the funds until the property is in a positive operating cash flow position.

Finding No. 2021-001; CFDA #14.157, Supportive Housing for the Elderly Statement of Condition During the years ended July 31, 2019, 2020 and 2021, management did not make the required residual receipts reserve deposit in the amount of $81,489 within 90 days of year ended July 31, 2018, as required by HUD. The residual receipts amount has not been deposited as of the date of this report. Criteria Residual receipts reserve deposits should be made within 90 days of year end. Questioned Costs None Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement. Context Annual calculation was not prepared by the management agent, and accordingly, the required deposit was not made. The auditor notes that the deposit requirement was calculated with the inclusion of a subsidy receivable due from HUD that was not received until after the 90-day period; however, we also note that at the point in time when the subsidy was received the delinquent deposit should have been made and was not made. Cause Controls were not in place in 2019 to ensure that required residual receipts reserve deposits are made timely. Recommendation Management should establish internal controls and procedures to ensure that required residual receipts reserve deposits are made timely. Auditor's Noncompliance Code: B - Failure to make required residual receipts deposits Reporting Views of Responsible Officials The property did not generate any positive operating cash in the 2020-2021 fiscal year and was not able to make the installment payments to the residual receipts. Additionally, there was a substantial increase in property operating expenses. Management is looking for forgiveness of the residual receipts deposit.

Statement of Condition During the years ended July 31, 2019, 2020 and 2021, management did not repay the loan advanced from the reserve for replacements upon receipt of the Section 8 subsidy that was outstanding at July 31, 2018. The loan in the amount of $19,337 is deemed to be an unauthorized distribution at July 31, 2021. The amount due to the reserve for replacement has not been deposited as of the date of this report. Criteria The terms of the loan from the reserve for replacement required repayment from the proceeds of the Section 8 subsidy. Questioned Costs None Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement. Context HUD approved a loan from the reserve for replacement with the stipulation that the loan is repaid when the delinquent Section 8 subsidy was paid by HUD. Cause Management did not maintain adequate controls in 2019 over the reserve for replacement requirements established with the loan advance to ensure the timely repayment of the loan upon receipt of the delayed Section 8 subsidy. Recommendation Management should establish internal controls and procedures to ensure that required payments are made timely. Auditor's Noncompliance Code: N - Reserve for replacements deposits Reporting Views of Responsible Officials During the 2020-2021 fiscal year, there was no operating surplus cash for the property to be able to make any repayments to the reserve. Additionally, there was a substantial increase in property operating expenses. Management will not be able to repay the funds until the property is in a positive operating cash flow position.

Department of Housing and Urban Development Finding No. 2020-001; CFDA #14.157, Supportive Housing for the Elderly Statement of Condition During testing of internal controls and compliance over cash disbursement for the year ended July 31, 2020, we noted the controls over approval for payment were inconsistently applied. Our testing identified exceptions related to lack of documentation in authorization for payment in 40 out of 40 invoices tested. Criteria Management has written procedures governing approval of invoices and filing of invoices. The regulatory agreement also requires that any undocumented expense or distribution shall be an ineligible Project expense. Questioned Costs None Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement Section 16. Context We identified exceptions in 40 out of 40 invoices tested in lack of documentation of approval for payment. Cause While policies were in place during the year, cash disbursement approvals performed by the site management were sent and retained in an electronic email format. Once approved, emails were deleted after 30 days creating inconsistent application of the policies and procedures. Recommendation We recommend that management implement a procedure for saving cash disbursement e-mail approvals electronically on a shared network drive, rather than in an email box. Auditor's Noncompliance Code: S - Internal Control Deficiencies Reporting Views of Responsible Officials Effective May 1, 2019, Faith Asset Management has contracted with Wildwood Property Management, LLC to provide consistent levels of experienced staff. Additionally, subsequent management implemented accounts payable software called AvidXChange that documents the invoice approvals which are then downloaded to the accounting software Realpage.

Finding No. 2020-002; CFDA #14.157, Supportive Housing for the Elderly Statement of Condition During the years ended July 31, 2019 and 2020, management did not make the required residual receipts reserve deposit in the amount of $81,489 within 90 days of year ended July 31, 2018, as required by HUD. The residual receipts amount has not been deposited as of the date of this report. Criteria Residual receipts reserve deposits should be made within 90 days of year end. Questioned Costs None Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement. Context Annual calculation was not prepared by the management agent, and accordingly, the required deposit was not made. The auditor notes that the deposit requirement was calculated with the inclusion of a subsidy receivable due from HUD that was not received until after the 90-day period; however, we also note that at the point in time when the subsidy was received the delinquent deposit should have been made and was not made. Cause Controls are not in place to ensure that required residual receipts reserve deposits are made timely. Recommendation Management should establish internal controls and procedures to ensure that required residual receipts reserve deposits are made timely. Auditor's Noncompliance Code: B - Failure to make required residual receipts deposits Reporting Views of Responsible Officials The property did not generate any positive operating cash in the 2019-2020 fiscal year and was not able to make the installment payments to the residual receipts. Additionally, there was a substantial increase in property operating expenses as a result of tax abatement inspection repairs and increase in vacancy resulting from the COVID-19 pandemic. Management is looking for forgiveness of the residual receipts deposit.

Finding No. 2020-003; CFDA #14.157, Supportive Housing for the Elderly Statement of Condition During the years ended July 31, 2019 and 2020, management did not repay the loan advanced from the reserve for replacements upon receipt of the Section 8 subsidy that was outstanding at July 31, 2018. The loan in the amount of $19,337 is deemed to be an unauthorized distribution at July 31, 2020. The amount due to the reserve for replacement has not been deposited as of the date of this report. Criteria The terms of the loan from the reserve for replacement required repayment from the proceeds of the Section 8 subsidy. Questioned Costs None Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement. Context HUD approved a loan from the reserve for replacement with the stipulation that the loan is repaid when the delinquent Section 8 subsidy was paid by HUD. Cause Management did not maintain adequate controls over the reserve for replacement requirements established with the loan advance to ensure the timely repayment of the loan upon receipt of the delayed Section 8 subsidy. Recommendation Management should establish internal controls and procedures to ensure that required payments are made timely. Auditor's Noncompliance Code: N - Reserve for replacements deposits Reporting Views of Responsible Officials During the 2019-2020 fiscal year, there was no operating surplus cash for the property to be able to make any repayments to the reserve. Additionally, there was a substantial increase in property operating expenses as a result of tax abatement inspection repairs and increase in vacancy resulting from the COVID-19 pandemic. Management will not be able to repay the funds until the property is in a positive operating cash flow position.

Department of Housing and Urban Development Finding No. 2019-002; CFDA #14.157, Supportive Housing for the Elderly Statement of Condition During the year ended July 31, 2018, management did not make the required residual receipts reserve deposit in the amount of $80,489 within 90 days of year ended July 31, 2018, as required by HUD. The residual receipts amount has not been deposited as of the date of this report. Criteria Residual receipts reserve deposits should be made within 90 days of year end. Questioned Costs None Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement. Context Annual calculation was not prepared by the management agent, and accordingly the required deposit was not made until after the audit was completed. The auditor notes that the deposit requirement was calculated with the inclusion of a subsidy receivable due from HUD that was not received until after the 90 day period; however, we also note that at the point in time when the subsidy was received the delinquent deposit should have been made. Cause Controls are not in place to ensure that required residual receipts reserve deposits are made timely. Recommendation Management should establish internal controls and procedures to ensure that required residual receipts reserve deposits are made timely. Auditor's Noncompliance Code: B - Failure to make required residual receipts deposits Reporting Views of Responsible Officials Management has implemented new controls in fiscal 2019 to evaluate surplus cash prior to the audit process. Management noted there was no surplus cash at July 31, 2019. However, management concedes that controls should record an accounts payable for surplus cash so that when funds are received the transfer to residual receipts is made promptly.

Finding No. 2019-003; CFDA #14.157, Supportive Housing for the Elderly Statement of Condition During the year ended July 31, 2019, management did not repay the loan advanced from the reserve for replacements upon receipt of the Section 8 subsidy that was outstanding at July 31, 2018. The loan in the amount of $19,337 is deemed to be an unauthorized distribution at July 31, 2019. The amount due to the reserve for replacement has not been deposited as of the date of this report. Criteria The terms of the loan from the reserve for replacement required repayment from the proceeds of the section 8 subsidy. Questioned Costs None Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement. Context HUD approved a loan from the reserve for replacement with the stipulation that the loan is repaid when the delinquent Section 8 subsidy was paid by HUD. Cause Management did not maintain adequate controls over the reserve for replacement to ensure the timely repayment of the loan upon receipt of the delayed Section 8 subsidy. Recommendation Management should establish internal controls and procedures to ensure that required payments are made timely. Auditor's Noncompliance Code: N - Reserve for replacements deposits Reporting Views of Responsible Officials Management has implemented new controls in fiscal 2019 to evaluate surplus cash prior to the audit process. Management noted there was no surplus cash at July 31, 2019. However, management concedes that controls should record an accounts payable for surplus cash so that when funds are received the transfer to residual receipts is made promptly.

Finding No. 2019-004; CFDA #14.195, Section 8 Housing Assistance Payments Program and CFDA #14.157, Supportive Housing for the Elderly Statement of Condition During the year ended July 31, 2019, management erroneously withdrew $2,463 from the reserve for replacements account, there is a carryover account that is not held by the lender. The amount was repaid to the reserve for replacement as of October 31, 2019. Criteria The regulatory agreement that all withdrawals from the reserve for replacement be approved by HUD prior to the withdrawal. Questioned Costs The withdrawal of $2,463 is an unauthorized distribution and a questioned cost. Effect or Potential Effect The Organization is not in compliance with the requirements of the regulatory agreement. Context Payments due to the management company are paid electronically, and in November 2018, $2,462.81 was electronically transferred to the management company. Management did not have adequate controls in place over the bank reconciliation process to identify this error in a fimely manner (see Finding 2009-001) Cause Management?s controls over the bank reconciliation process were not operating as designed and the error was not identified in the normal course of business. Recommendation Management should establish internal controls and procedures to ensure that errors are identified and correctly in a timely manner. Auditor's Noncompliance Code: N - Reserve for replacements deposits Reporting Views of Responsible Officials Management has implemented new controls in fiscal 2020

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